The Carrier Deal (Part II)


In this post (here), we outlined our objections to the “Carrier Deal.” That’s the arrangement that President-elect Donald Trump brokered, in order to keep a chunk of the Carrier company in Indiana, and not moving to Mexico.

In this post here, you’ll find the rest of the objection. It’s the essay we’d write if we were as good at political punditry as is the great Kevin Williamson. 🙂

We made the high-level points; Williamson added the meat on the bones.

Williamson’s column’s headline is: “The Economic Stupidity of the Carrier Bailout,” and the sub-head is: “It’s not conservative, but rather a rejection of economic reality.

In his great post, Williamson makes several points that are in disagreement with some points that we’ve made in the past. Since Williamson is as brilliant as he is, that forces me to go do some research. Here’s one such passage:

Part of the Republican response to this was based on Lafferism, and generally on a very naïve version of Lafferism: “You can’t call that notional $1 billion tax cut a $1 billion expenditure, because the tax cut will produce growth effects that add to tax revenue.” That is true as far as it goes — which is generally not as far as Republicans take it. There are commonly observed growth effects from cuts in tax rates, but they generally amount to something like 20 percent of the revenue “lost” under the static-projection model. Sometimes they have been more than that. But the pop-con belief that growth effects frequently amount to more than 100 percent of forgone revenue — that tax cuts “pay for themselves” or pay for themselves and then some — is not sustained by the evidence, and certainly not from the evidence of modern, advanced economies with tax rates that already are relatively low both by world standards and by historical standards.

I highlighted in red the parts that are going to send me back to the economic drawing board.

Williamson makes this excellent point, in support of his sub-headline.

But in the matter of industry-specific or firm-specific tax benefits of the sort extended to Carrier in Indiana, they [populist-conservative supporters of the Carrier Deal] do not have a leg to stand on. These are straight-up corporate welfare, ethically and fiscally indistinguishable from shipping containers full of $100 bills.

Williamson finishes his very perspective-bringing, reality-based post with the following:

There is no magical revenue fairy. And, as a budgetary matter, targeted tax benefits are identical to spending, both for the government and for the beneficiary. This is not a question of ethics but a question of accounting. Somebody always has to pay the bill, eventually. It probably won’t be the pop-con on the radio telling you that we can make money by giving it away, so long as we give it away to the right sort of people: Solyndra bad, Carrier good.

Conservatives have a hard enough time of it as it is without inflicting needless stupidity on themselves.

Good point.

I’d add one last point: a key part of Williamson’s sub-head — “…rejection of economic reality” — is not something in which Conservatives are supposed to traffic.

— xPraetorius

 

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